Nigeria requires an estimated $900 billion investment portfolio to attain a stable energy sector (Oil and Gas and power) in the next 30 years. Much of the refining and oil production increase will be funded by the private sector, whereas gas expansion will be funded by the public sector.
This is the contention of the draft report of the National Integrated Infrastructure master plan (NIIMP) on national infrastructure targets and investment, prepared by the National Planning Commission (NPC).
The report explained that to achieve the goals and objectives of stability in the energy sector, the country needs to increase its investment in energy infrastructure.
A breakdown of allocation to specific sector shows that power would require $550 billion, while the oil and gas sector would require $350 billion. The amount includes the maintenance cost of all these sectors.
Over a five-year period, the country plans to spend $18 billion on power, out of which $14 billion is allocated to increase generation capacity to 20,000megawatts by 2018, and $2billion each for the transmission and distribution subsectors.
Austine Nweze, of the Pan Atlantic University, Lagos, reacting to this development, commended the National Planning Commission (NPC) for putting up such effort.
Nweze however observed that there should be some low hanging fruits which the government can garner within the next two, three and four years.
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“ It is a good thing that power has been identified as a major catalyst to national development , hence the need for the government to support its development for economic growth”, he said.
The report said that while the various sector plans have focused on infrastructure development in the past, these plans were developed independently of each other.
The NIIMP provides an integrated view of infrastructure development in Nigeria, with clear linkages across the key sectors.
It holds that the sector, comprising of the oil and gas, as well as, the power subsectors, is one of the most important in Nigeria, because of its multiplier effect across all other sectors of the economy. It contributes significantly to tax revenues, and spurs economic growth.
In the case of oil and gas, the report states that the biggest cost drivers would be increasing refining capacity, building additional pipelines, and developing the infrastructure to increase production capacity in both oil and gas.
The report further said that the low average refining capacity of Nigeria’s four refineries reflects challenges that needed to be tackled.
Attention is needed, especially, in the area of improved maintenance, it states, adding that transport and storage infrastructure in the oil and gas sector is capital intensive, and investment in that area had been slow, compared to other countries with similar potential.
It added that Nigeria has an abundance of most of the energy sources (fossil fuels, hydro, solar, tidal, geothermal, and biomass) for power generation, which if properly harnessed, could meet the country’s energy needs and generate export revenue.
Currently, however, Nigeria’s per capita electricity generation is among the lowest in the world, limiting economic growth and productivity due to its impact on practically all other sectors.
For energy, it stated that the bulk of the investment would be for increasing generation capacity from the current levels of 7 GW to 350 GW, (7,000megawatts to 350,000 megawatts) and building the transmission network to transfer the generated electricity across the country.
Generation expansion will largely be funded by the private sector, the report stated.
The effect of weak infrastructure is most striking in the energy sector. Nigeria’s per capita energy consumption of 136 kWh per annum is less than 3 percent of South Africa’s 4,803 kWh.
In order to close its current infrastructure gap and reach the desired total investment levels, Nigeria must aggressively increase infrastructure spending, the report said.
“The investments over the next 30 years on infrastructure, and generally in the economy are in the region of $2.9 trillion. Spending would need to ramp up fairly quickly, from the current 3-5 percent of GDP to an average of 9 percent over the 30 year period.
“Given Nigeria’s high GDP growth projected for the period, such a ramp-up is particularly challenging. Moreover, maintenance costs will grow significantly, as infrastructure stock increases. According to global benchmarks, maintenance spend should amount to 2 percent of GDP, which translates into a total of about $700 billion from 2014 to 2043, or $23 billion per year. This is more than double the current yearly total spent on infrastructure in Nigeria.”
Olusola Bello
